Case Study

Source-to-pay transformation nets a Fortune 500 food and beverage company savings of US$35 million

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A Fortune 500 food and beverage company

Consumer goods

Business need:
Transform existing India-based source-to-pay function to best-in-class and drive related metrics, practices and processes

Genpact solution:
Leveraged Genpact’s proprietary Smart Enterprise Processes framework to perform an end-to-end source-to-pay workflow assessment, benchmarked the results against industry best-in-class, and developed a transformation roadmap

Business impact:
More effective source-to-pay organization with standardized processes and optimized technology resulting in approximately US$35 million cost savings

Business challenge

The client started a global initiative to drive additional savings from indirect spends. The Indian operations specifically suffered from decentralized buying as the sourcing team was not involved in purchasing decisions. Fragmented and inefficient source-to-pay (S2P) processes resulted in considerable value leakages as well. Lastly, limited use of S2P technology had led to a significant amount of manual work and subsequent low productivity.

Genpact solution

Genpact conducted a detailed process assessment across sourcing, procurement, and payables operations using Smart Enterprise Processes (SEPSM). This exercise was done across 24 locations and covered 35,000 purchase orders (POs) and more than one million invoices, unearthing the following issues:

  • Low spend under management (40%) because of limited sourcing team involvement in finalizing sourcing decisions
  • Non-consolidation spend across categories and plants
  • The absence of sourcing effectiveness metrics (key performance indicators for contract coverage, closure cycle times, etc.)
  • A large number of spot purchases due to the absence of an online catalog

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  • Preferred supplier list not in place across categories and businesses
  • Low PO penetration rates (27%) and manual PO transmission
  • Low paid on time as more than 7 in 10 payments were delayed
  • An inefficient vendor help desk

The Genpact team analyzed these gaps and designed a transformation roadmap. The recommended solutions spanned across:

  • Sourcing: Spend was consolidated across brands, categories, and businesses. Genpact augmented the client team with additional category management and negotiation rigor. The team also created an improved and comprehensive supplier database to foster increased use of preferred suppliers
  • Procurement: A shared service center was created to improve overall procurement effectiveness. Item master data were harmonized to facilitate spend consolidation and improve visibility into inventory locations. The team implemented an online catalog management system to reduce leakage, ensure compliance, and increase the number of POs
  • Accounts payable: Payment terms were rationalized leading to reduced invoice receipt cycle times, improved paid-on-time rates, and an increase in early payment discounts
  • Technology: The systems and processes used in sourcing were more fully digitized, as were those employed to manage contract life cycles, document and approve travel expenses, and maintain supplier networks

Business impact

  • Cost savings of US$35 million
  • A six-fold improvement in sourcing and procurement organization effectiveness as a result of integrated processes and policies, increased compliance, and improved spend visibility, which rose from 40% to 98%

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